Broadcom’s acquisition of VMware: effects on licensing, products, and cloud strategy
Broadcom is rebranding VMware Cloud Foundation as a unified private cloud solution. Yet, beneath this ambition lies a raft of extensive modifications reshaping VMware’s licensing, product suite, partner network, and customer approach.
Broadcom’s $61 billion purchase of VMware was completed in November 2023. Within a year of the transaction, Broadcom swiftly remodelled VMware’s commercial structure – spanning licensing and product catalogues to channel direction – leaving clients and partners racing to adjust.
This article outlines the principal changes made by Broadcom, industry responses, and why these changes have caused a rising interest in alternative cloud options. We end with practical advice for IT executives managing this evolution.
If you are already familiar with the background on the Broadcom/VMWare price increases, and just want practical advice on your technical needs skip to:
Licence and subscription model, please?
One of Broadcom’s first changes was to discontinue VMware’s perpetual licensing, moving solely to subscriptions. In December 2023 – just weeks after finalising the deal – Broadcom revealed the immediate cessation of perpetual VMware licences, replacing them with a subscription-based approach. Customers can no longer purchase individual VMware products outright; instead, software must now be acquired as time-restricted subscriptions, typically bundled into more extensive suites.
Under this revised setup, VMware’s portfolio was streamlined into just a handful of subscription bundles. Broadcom consolidated hundreds of separate components into four primary product packages, most notably: VMware Cloud Foundation (the comprehensive private cloud stack) and VMware vSphere Foundation (a more streamlined virtualisation suite). Standalone licences for numerous individual products were withdrawn; those functionalities now come solely as part of the larger bundles. For instance, a client who previously may have obtained vSphere Enterprise Plus and vCenter individually must now subscribe to an entire Cloud Foundation or vSphere Foundation package – even if not all additional components, such as vSAN or Tanzu Kubernetes, are required. This “all-in-one” packaging is intended to add value, but it also constrains flexibility and obliges customers to pay for a broader selection than necessary.
The pricing implications have been considerable. Many organisations are facing substantial price shocks as they adapt to Broadcom’s subscriptions. The removal of less expensive editions and perpetual licence plus support deals often results in increased annual expenses. Gartner observed some clients moving from basic vSphere licences to the complete Cloud Foundation “Cadillac” SKU encountering “very large price rises.” Forrester similarly reported “notable price escalations for some customers, with anecdotal accounts of increases from 400% up to 700%.” An IDC report determined that as a result of new bundling and licensing metrics, renewal costs could climb from 100% to as much as 800% in extreme instances. A prominent case was AT&T, which asserted that Broadcom’s new policy would raise its VMware expenses by 1,050%, compelling AT&T to either “pay a king’s ransom for undesired subscriptions” or forfeit support for 75,000 VMs. (AT&T resorted to legal action over these terms before eventually reaching a settlement.)
Broadcom’s licensing reforms have swapped VMware’s previous adaptability for a more restrictive, subscription-focused system.
Not all users are equally impacted. Those already on subscription models or accessing VMware through cloud provider services have seen relatively minor effects. However, customers operating legacy VMware versions or possessing substantial perpetual licences have borne the brunt of the shift. An especially harsh adjustment was VMware’s change in licensing metric from per-CPU to per-core licensing. In 2023, VMware (directed by Broadcom) reduced the core allowance per CPU from 32 to 16 cores, instantaneously doubling the number of licences needed for contemporary high-core-count processors. Combined with the new subscription requirement, these changes more or less guaranteed increased costs for many.
What got the chop?
Along with licensing reforms, Broadcom enacted a sweeping consolidation of VMware’s product range, focusing on integrated solutions. VMware previously maintained an extensive product list (close to 170 offerings) serving various infrastructure needs. After the acquisition, Broadcom “drastically reduced VMware to two key offerings: the VMware Cloud Foundation private cloud stack and the smaller VMware vSphere Foundation.”
These bundles now contain the principal capabilities once sold as distinct products – compute (vSphere/ESXi), storage (vSAN), networking (NSX), and management tools (the Aria suite, formerly vRealize) are all included.
- VMware Cloud Foundation (VCF) stands as the flagship, providing a full-featured private cloud with every major component integrated.
- VMware vSphere Foundation is a pared-down bundle for more conventional data centre requirements, including vSphere plus key extras like Tanzu Kubernetes and Aria Operations, but not the full software-defined data centre stack.
In Broadcom’s vision, the majority of customers will ultimately transition to one of these two comprehensive platforms – with a distinct preference for enterprises to embrace the premium Cloud Foundation suite for maximum functionality.
The logic for this consolidation is to simplify the range and drive wider adoption of VMware’s full technology stack. The integrated methodology aims to provide public-cloud-like flexibility for on-premises environments while maintaining enterprise-level control.
But in order to achieve this end, you don’t have to swallow the bitter pill of price hikes. Partnering with a Managed Service Provider – specifically one with cloud expertise – can help you:
- Only pay for what you consume
- Leverage Enterprise tier rates with Broadcom (up to 45% discount)
- Outsource managing the environment, including the hardware costs, management costs, rack and power costs, and licensing costs
- Leverage additional features such as OS management, database management, Endpoint Detection and Response for security, and even Backup and Disaster Recovery
Go public, or keep it private?
The disruption in VMware’s ecosystem has not occurred in a vacuum. The magnitude of the changes has galvanised interest in alternative cloud and virtualisation solutions.
Public cloud providers have benefited from the recent changes and uncertainty. Reports indicate a surge in the number of organisations accelerating plans to migrate workloads to AWS, Microsoft Azure, or Google Cloud Platform – sometimes bypassing virtualisation entirely in favour of container-based or cloud-native architectures.
However, that doesn’t mean that just because you rely on a private cloud and virtualisation devices now, that you must move to the public cloud in future.
Must you bite the bullet?
Many customers and partners have voiced strong opinions, warning that the “one-size-fits-all” model risks alienating a significant portion of the VMware customer base, due to rising costs and reduced flexibility. Surveys conducted by IT research organisations have registered substantial drops in customer satisfaction, with price increases, forced migrations, and the loss of tailored licensing options ranking among the top complaints. Some lament the loss of flexibility and the abrupt disappearance of familiar SKUs, feeling pressured into expensive bundles that far exceed their actual needs. Others are wary of the direct-sales approach, which removes the trusted advisors and value-added support that resellers once provided.
For many businesses – especially small to mid-sized organisations or those with modest infrastructure needs – the shift has been deeply unsettling. The abrupt move away from perpetual licensing, the removal of long-familiar standalone products, and the rigid packaging have left customers feeling both squeezed financially and deprived of the flexibility that once defined VMware’s appeal.
Resentment has, unsurprisingly, been especially pronounced among legacy customers. Many have voiced frustration at what they see as a “pay more, get more than you need” proposition, forced into costly, feature-rich bundles that far exceed their requirements.
Leveraging trusted IT partners and MSPs
Claranet’s expert cloud team will enable you to leverage:
- A detailed cost comparison to understand migrating your existing on-premises estate would prove more cost-effective (including detailed breakdowns on Existing hardware spec (to include hardware refresh), Rack and power costs, People costs, License costs (Broadcom, Microsoft or existing backup application costs)
- Alternative public or private cloud options that enable you to retain the same functionality, while only paying for what you consume
- Alternatives solutions such a Nutanix, helping you retain your on-premises infrastructure but replace Broadcom
- A replacement VMWare platform with better performing CPUs to reduce the core count and thus reduce licensing costs.
For enterprise IT decision-makers, responding to Broadcom’s new VMware playbook requires both strategic foresight and practical agility. The following recommendations may help organisations chart a course through the transition:
- Conduct a comprehensive audit of existing VMware deployments. Determine which features and components are truly essential, and evaluate the cost implications of remaining on – or migrating off – the new subscription bundles.
- Explore alternatives: Even if remaining on VMware, benchmark other solutions in the market. Pilot competing virtualisation or cloud platforms to assess fit, potential savings, and the operational impact of migration. Many vendors offer proof-of-concept or migration assistance for prospective new customers.
- Leverage partners judiciously: Partner relationships are in flux, but experienced integrators and consultants can help organisations navigate licensing changes, architect hybrid solutions, or negotiate more favourable terms.
- Plan for flexibility: Avoid long-term lock-in wherever possible by architecting infrastructure with portability in mind—using containers, open standards, and abstraction layers to future-proof technology decisions against further vendor-driven disruption.
Pay for what you don’t need? No, thanks.
The changes in VMWare’s portfolio, licensing and subscription models seems to present businesses with two choices: pay up or move on. But this is a lie. There is another way.
Some customers are re-evaluating their IT strategies. Some are doubling down on VMware Cloud Foundation, making the most of the advanced stack and its tighter integration. Others are actively piloting competing technologies – whether open-source virtualisation solutions, emerging hyperconverged offerings, or pure public cloud architectures – in search of a better fit for their requirements and budgets.
Talk to Claranet’s team of cloud specialists to find out how you can right-size your cloud spend.
